Tech Rumor of the Day: Microsoft, Verizon

Now the rumor is that Microsoft is working with Verizon on a touchsceen smartphone.

Now that Verizon ( VZ) is the biggest player in wireless, it seems all the big names want to talk about deals.

The latest rumor is that Microsoft ( MSFT) is working with Verizon on a touchsceen smartphone, apparently dubbed Pink and due out early next year, according to The Wall Street Journal. The speculation follows a report Monday that Apple ( AAPL) and Verizon were in discussions about new devices.

Microsoft's wireless business has been fading as its Windows Mobile operating system for smartphones has lost ground to rivals like Apple, Research In Motion ( RIMM) and Nokia ( NOK). Without a device, Microsoft has been disadvantaged in this battle. Start the blue screen, CTRL, ALT, DELETE jokes now.

There had been speculation for more than a year that Microsoft would create a phone using some of the expertise it gained with the Zune music player. Microsoft is also expected to launch a mobile version of its Windows 7 operating system next year.

Verizon or AT&T ( MSFT) likely would be the first two options if Microsoft wanted to debut the device on an exclusive basis, like Apple's iPhone.

In the first quarter, Verizon's 86.6 million subscriber count surpassed AT&T's 78.2 million user level for the first time in three years. That's not entirely irrelevant, since the telcos basically divide the biggest chunk of the market into two incompatible network technologies.

Verizon has also promised to start operation of a 4G wireless network using a faster long-term technology next year. The new network will require new phones and other mobile devices, a big opportunity for hardware developers.

With mobile broadband still the next big frontier for computing and media devices, it's probably no surprise that Microsoft, like other players including Dell ( DELL), Palm ( PALM) and Asus have smartphone plans in the works.